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Delaware attorney general will seek to dissolve Backpage.com

The federal government has shut down Backpage.com, but it retains its "good standing'' as a Delaware limited liability company. Now Delaware's attorney general's office has filed a complaint to dissolve the LLC. (State of Delaware, screengrab/backpage.com)

Delaware’s reputation as a haven for limited liability companies engaged in criminal activities across the globe has drawn serious scrutiny in recent months.

And this month, the pressure has mounted to change Delaware’s law that allows the companies known as LLCs to operate without disclosing the true owners’ identities.

In business-friendly Delaware, LLCs are big business. About 800,000 are registered, and, in the fiscal year that ended June 30, they generated $274 million in revenue for the state – about 6.5 percent of the general fund budget.

There are no signs that such a move is in the works, but the state attorney general’s office is planning to use new powers to try revoking Backpage.com’s registration.

For more than a decade, Backpage.com advertised prostitution services. And it was accused of facilitating child sex trafficking. Earlier this year, the federal government shut down the web page, and the former CEO pleaded guilty to money laundering and conspiracy to facilitate prostitution. In Arizona, seven other executives are facing charges.

That didn’t stop Backpage.com, however, from registering again June 28 with Delaware’s Division of Corporations, where it remains in “good standing,” as WHYY has reported.

Last week, Attorney General Matt Denn’s office informed WHYY and Nick Wasileski, president of the Delaware Coalition for Open Government, that it will seek to “dissolve” the LLC.

Denn’s move would be the first under a new law — passed unanimously this June and signed July 23 by Gov. John Carney — that gives his office the authority to seek dissolution of a limited liability company in a petition with Chancery Court, which handles business-related disputes.

“I’m very encouraged they are going to do it,” Wasileski said.

The move was also applauded by Patty D’Angelo, who works with Zoë Ministries, a group that aims to eliminate sex trafficking in Delaware.

“It definitely sends a message that trafficking is not welcome in Delaware, and it is a great step in the right direction,” D’Angelo said.

But Wasileski’s enthusiasm was tempered by his suspicion that it not the diligence of Denn’s office but rather his own checking of Backpage.com’s status this month — and WHYY’s story — that spurred law enforcement to step in.

“We are moving the ball, but don’t you think there should be some type of checks and balances, that they would be aware that Backpage.com re-formed?” he said.

Denn spokesman Carl Kanefsky said his office learned about Backpage.com’s re-registration from the Division of Corporations, which “requested that we take action to dissolve it.” Kanefsky wouldn’t say when those conversations occurred or when it was decided to take action.

In a letter to Wasileski and an email to WHYY, staffers wrote that attorneys would “act deliberately” in preparing their dissolution petition.

Denn’s office won’t, however, appoint an independent counsel to recommend changes so criminal enterprises can’t register in the first place — or register again after they violate the law.

A letter to Wasileski from Aaron Goldstein, Denn’s chief deputy, said prosecutors “generally” appoint independent counsels only when there must be an investigation of a specific target and the office has an “actual or apparent” conflict of interest.

Goldstein wrote, however, that the “appropriate vehicle” to review an existing law is a group convened by the General Assembly. He volunteered his office’s participation if such a group is formed.

That decision disappointed Wasileski, whose group and others, including the League of Women Voters, had called for the independent counsel. He cited Backpage.com as a perfect example of why Denn should appoint one.

“The attorney general’s mandate is to protect the public. When people are laundering money and facilitating child sex trafficking, I think that falls under the definition of protecting the public, but they chose not to” appoint an independent counsel, he said.

Other examples of criminal activity linked to Delaware LLCs abound.

The indictment against former Trump campaign chair Paul Manafort stated nine Delaware business entities were used in the international money laundering and tax fraud scheme he’s charged with running.

The Mexican drug lord known as “El Chapo” allegedly used a Delaware LLC for his drug money.

And there also were reports this year that President Donald Trump’s former attorney Michael Cohen used a Delaware LLC to pay porn star Stormy Daniels to stay silent about her relationship with the president.